How to Start a Parking Lot Business
Parking lots are located in places where street parking is limited and there is plenty of automobile traffic. Parking may be offered in exterior open lots or in interior secured garages.
Parking lots are found in commercial areas, next to airports, near hospitals, adjacent to schools, and near event spaces that attract a large crowd.
There are two facets in the parking lot business. One is the owning and operating the parking lots and the other opportunity is managing the parking lots on behalf of other owners.
Learn how to start your own Parking Lot Business and whether it is the right fit for you.
Ready to form your LLC? Check out the Top LLC Formation Services.
Start a parking lot business by following these 10 steps:
- Plan your Parking Lot Business
- Form your Parking Lot Business into a Legal Entity
- Register your Parking Lot Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Parking Lot Business
- Get the Necessary Permits & Licenses for your Parking Lot Business
- Get Parking Lot Business Insurance
- Define your Parking Lot Business Brand
- Create your Parking Lot Business Website
- Set up your Business Phone System
We have put together this simple guide to starting your parking lot business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What will you name your business?
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
Luckily we have done a lot of this research for you.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Parking Lot Business Name Generator
If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
What are the costs involved in opening a parking lot business?
Initial startup costs include the rental or purchase of the lot/garage, purchase or lease of equipment, such as transaction machines, lift gates, and security cameras. Garages are more expensive, and costs are much higher for multilevel garages equipped with elevators.
In smaller cities, it is possible to start with a single small outdoor lot for less than $10,000 in startup capital if you lease the land. An indoor garage can cost many hundreds of thousands of dollars and upwards to millions depending on its size and location.
What are the ongoing expenses for a parking lot business?
Parking lots are relatively low-maintenance businesses. The majority of work that goes into maintaining a parking lot involves repainting lines, replacing signage, and paying for lighting (and possibly heat) if it is a garage.
Typical monthly expenditures for a small outside lot will be around $5,000 per month consisting of:
- Rent or Mortgage payment $2,000 per month ($0.50 per square foot per month).
- Wages for parking lot attendants - $2,240 per month ($10 per hour = 56 hours per week) Double this amount if open at night as well as in the day.
- Employer’s portion of employee taxes $336 per month
- Utilities - $200 per month (lighting)
- Insurance - $100 per month
- Supplies - $100 per month (parking lot receipt tickets)
Who is the target market?
Parking lots are used by customers because of the convenience of parking near something else. The customers are those that drive by the parking lot.
How does a parking lot business make money?
Most parking lots make money by filling up the empty spaces with cars that pay an hourly rate or flat rate for the parking. Parking lots are especially profitable during peak traffic in larger cities. For example, many lots take advantage of the number of drivers in town during sports games and those attending other big events.
For a parking lot company that offers parking lot management services, they are paid a monthly fee that is based on the revenues produced by the parking lots they manage for other owners.
How much can you charge customers?
The price you can charge depends on the demand for parking and the nearby competitive prices. In rural areas, $1 per hour is very common. In major metropolitan areas that are very congested, with extraordinarily high real estate prices, such as New York City, it is possible to charge up to $15 for fifteen minutes ($60 per hour).
How much profit can a parking lot business make?
One small lot with 20 spaces that earns, on average, $10 per space per day will have $200 per day in gross revenues and earn $73,000 in gross revenues per year. If the lot is outdoors and 4,000 square feet at $0.50 per square foot per month rent, the annual rent will be $24,000. Wages paid at minimum wage level for parking lot attendants will be about $20,800 per year, leaving $28,200 in gross profits before taxes from a single, small parking lot.
Large parking lots can have many hundreds of parking spaces, which is a multiplication of these basic profit estimates.
How can you make your business more profitable?
The parking lot business becomes more profitable through economies of scale. Owning more parking lots that use the same back office and support services is the key to growth and increasing profits. In addition to management of parking services, the business can expand to offer other support services to commercial building owners such as energy monitoring, facilities engineering, HVAC, janitorial, maintenance, and landscaping.
STEP 2: Form a legal entity
The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your parking lot business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN through the IRS website. If you would like to learn more about EINs, read our article, What is an EIN?
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a parking lot. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Certificate of Occupancy
A parking lot is either located in an empty lot of land or a large parking structure. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a bar.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your parking lot business will be in compliance and able to obtain a CO.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
FInd out what types of insurance your Parking Lot Business needs and how much it will cost you by reading our guide Business Insurance for Parking Lot Business.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
Recommended: Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a parking lot business
These businesses are especially dependent upon location. Parking lots and garages located near other lots have stiff competition. One thing that helps attract customers is to have the parking lot attendant wave to the passing cars to encourage them to enter the parking lot.
How to keep customers coming back
Giving out discount coupons helps attract new customers. Having a loyalty reward program that offers discounts for regular users is a good way to retain customers.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.
Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
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Is this Business Right For You?
This business is an attractive investment opportunity for those investors with capital to invest in the leasing and/or acquisition of parking lots, who are looking for a long-term, fairly stable rate of return on the investment. The alternative is setting up a service company to manage the operation of the parking lot/services for other owners.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a parking lot business?
Once setup, this business runs almost automatically. The business owner’s concerns are hiring staff and making sure the parking lot attendants show up on time to do their job. Another duty of the owner is to manage the cash deposits, get change from the bank, and create the accounting records for the daily proceeds.
What are some skills and experiences that will help you build a successful parking lot business?
Success in this business comes from identifying the opportunities that are profitable. The ability to analyze each situation to determine potential parking demand and calculate the revenues versus the expenses is the key factor in becoming a success.
What is the growth potential for a parking lot business?
Many investor/owners start with a single parking lot and then invest in other lots to grow the business. Parking lot opportunities include commercial office buildings, retail operations, shopping malls, mixed-use facilities, hotels, valet services, arenas, stadiums, events, medical centers, and hospitals.
One large parking lot management company called Ace Parking started in 1950 with a single parking lot. The company has steadily grown since then. Ace Parking now manages 450 parking lots across America and employs more than 4,500 people.
In the Unites States, Statistic reports that there are over US $10 billion in revenues earned each year from parking lot operations. IBISWorld reports that there are over 10,000 parking lot businesses in the USA that employ close to 160,000 people. The top three companies in this industry control a large share of the total market, earning 37.6% of the total industry revenues each year. Small operators make up the remaining 62.4% of the industry and mostly cater to the local market demand for parking.
Besides Ace Parking, the other largest operators include ABM Industries Inc. and Central Parking Corp., which merged with Standard Parking Corp. during 2012.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a parking lot business?
It is a good idea to work as a parking lot attendant for at least a short period to understand how this business works. This business is not complicated and virtually anyone can do it, as long as they have, or can raise, the capital necessary to get started.
How and when to build a team
This business operates with very few employees per lot. When the business grows, by acquiring more parking lots, it is time to add more parking lot attendants for each new lot added to the business. It is very easy to find minimum wage workers to be parking lot attendants because the job skills necessary are minimal.